Item 5. Fees and Compensation
The fee structure for each Fund is set forth in the offering documents for that Fund, or in the managed account
agreement for a separately managed account, as the case may be. The management fee paid to the Advisor
(the “Management Fee”) is generally payable quarterly and is prorated for periods less than a full quarter. The
Management Fee may vary for different classes of shares in the Funds (collectively, the “Shares”), but generally
ranges from 0.10% to 0.50% (per quarter), of the net asset value of a particular class of Shares, measured as of
the last day of the quarter, although some Funds may pay a monthly Management Fee. In certain Funds, the
Management Fee is calculated based on invested capital.
In addition, the Advisor may receive an incentive fee/allocation (the “Incentive Fee”) on an annual basis (or, in
some cases, quarterly or as agreed to with investors) in certain share classes or for certain Funds (generally
ranging from 5% to 20% per annum) of net profits. As set forth more fully in the offering documentation for a
particular Fund, the Incentive Fee in some share classes or Funds is subject to hurdle rates or clawback provisions.
The Incentive Fee is generally subject to the recoupment of unrecovered net losses incurred previously. For the
Blue Ocean and Blue Sky Aviation Funds, the Incentive Fee is typically structured as a carried interest, payable
after investors have received all of their capital contributions back, plus a preferred return.
Investors in Funds where the Incentive Fee is charged at the overall Fund level or to a particular class or series of
shares should note that as equalization or series accounting is not used, the Incentive Fee will be based on the
overall performance of the Fund or class or series of shares, as applicable, as opposed to the specific
performance of the shares held by a particular Investor. Depending upon the circumstances, certain Investors
may be advantaged while others may be disadvantaged depending on the calculation methodology being
used.
The Advisor, in its sole discretion, may waive or reduce all or any portion of the Management Fee and/or
Incentive Fee for certain investors in the Funds. New classes of Shares may also be created with different fee
structures. For separately managed accounts, fees generally will track the range of Management
Fees/Incentive Fees for the Funds depending on the amount of assets in the account or as may be negotiated.
Any Incentive Fee for a managed account will be subject to negotiation between the Advisor and the investor.
In addition, the Advisor and/or Funds may, without notice to investors, enter into agreements with certain
investors who, in the Advisor’s judgment, make a significant investment in a Fund, granting them, among other
things, greater portfolio transparency, fee waivers or reductions, additional rights to reports or other information
and other more favorable investment terms than the terms associated with an investment by investors pursuant
to the offering documentation. The Funds have the power to create different classes of interests for certain
substantial investors and may create additional classes having different rights for the purpose of implementing
such agreements. For example, such additional classes of interests may have different voting rights,
management fees or incentive compensation arrangements. In offering more favorable investment terms to
certain investors, the Advisor and/or Funds shall have no obligation, subject to any applicable “most favored
nations” agreements, to offer such additional rights, terms or conditions to all investors.
Each Fund’s expenses are set forth in the respective offering documents for the particular Fund and may include,
the Management Fee and the Incentive Fee (if applicable); fees of the Fund’s independent auditors, legal
counsel and Administrator; fees for the maintenance of the Fund’s books and accounts, including license fees
and costs associated with any software used to maintain the books and records for the Fund, including portfolio
management, risk management and investor reporting and technology expenses; fees of any separate
accountants retained for the Fund and fees paid pursuant to the Services Agreement (see discussion below on
the Services Agreement); registration, licensing and custodian fees; directors’ fees; taxes (including withholding
and transfer taxes); bank service fees; insurance premiums; organizational expenses; governmental fees,
preparation and distribution of Shareholders’ reports and other communications with Shareholders and the
public, the costs incurred in connection with marketing the Fund Shares (including travel, car service, car rental
and parking and lodging expenses incurred in attending conferences and presentations with investors and
prospective investors), the cost of updating the Fund’s offering documents, professional fees of consultants
(including risk management and compliance consultants and, where appropriate/applicable, valuation
experts, agents and ratings agencies) incurred in connection with the operations of the Fund, manager research
costs and background checks, subscription fees for market data services, databases and related research
expenses and other due diligence tools (including travel and expenses in connection with monitoring and
conducting due diligence on investments) and the costs and expenses of securing and maintaining any line of
credit or liquidity facility, including interest expense and commitment fees. All travel and lodging expense
reimbursements are subject to the Advisor’s Code of Ethics and its Travel Reimbursement Policy, which limit the
types of expenses that may be incurred and provides that expenses will only be reimbursed if they are ordinary
and reasonable.
In addition to the fees and expenses described above, the Funds (including the Blue Ocean Funds and the Blue
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